Tesla’s India Plans: Factory Setup & New Car for Developing Nations

By | January 13, 2024

Tesla, the renowned electric vehicle (EV) manufacturer, is reportedly making significant plans to enter the Indian market. According to insiders familiar with the company’s official business plans, Tesla is in advanced talks to establish a manufacturing plant in India, with a potential investment of around $30 billion over the next five years. This investment would encompass the production of a new small car for developing nations, the development of a battery ecosystem, and support for ancillary industries.

The initial investment is expected to involve $3 billion for the production of a new small car from an Indian plant. This vehicle would be specifically designed for the wider developing world. Additionally, there are plans for a $10 billion commitment from other partners to support this manufacturing venture. Over a five-year period, a cumulative investment of $15 billion is also anticipated in the battery industry ecosystem.

The potential entry of Tesla into India is contingent upon the formulation of a new EV policy by the Indian government. If the policy meets Tesla’s requirements for a rebate in the current import duty structure for foreign-made EVs, the company plans to introduce a limited number of its standard brands to compete in the Indian luxury car market. Simultaneously, Tesla aims to build and test a charging ecosystem. The company may also invest in a factory in India to manufacture the first small car within two years, with completion of the facility expected within three years. This small car is expected to be more affordable than Tesla’s usual models, catering to the demands of countries in Asia, Africa, and Latin America. While the factory will partially serve the Indian market, its primary focus will be on exports.

An individual closely associated with Tesla’s discussions on the project stated, “If it works out, this will be the biggest foreign direct investment commitment in India. Tesla will invest $3 billion in the plant, and other partners in its manufacturing ecosystem will invest another $10 billion. In parallel, there will be another $5 billion investment in batteries that will grow to $15 billion. We are looking at a total of $30 billion.” This signifies the potential for a transformative moment for India’s EV industry, comparable to the impact Maruti-Suzuki had on the small car revolution in the 1980s.

While Tesla has not officially commented on its specific plans for India, it is evident that the company holds a strong interest in the country. Tesla founder Elon Musk, who met with Indian Prime Minister Narendra Modi in 2023, has expressed admiration for India and its leadership. Tesla’s plans align with India’s goal of promoting EV adoption and its commitment to reducing carbon emissions. Furthermore, Tesla’s investment in India would contribute to the country’s manufacturing ambitions and strengthen the strategic partnership between India and the United States.

Regarding the location of the manufacturing plant, Tesla is considering four major auto manufacturing hubs in India: Haryana, Tamil Nadu, Maharashtra, and Gujarat. However, given the emphasis on exporting vehicles, it is likely that Tesla may choose a coastal state in the west or south of India.

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Tesla’s track record suggests that the company is capable of setting up a plant within a relatively short timeframe. Tesla was able to establish a factory in Germany within two years and another in China within one year. Based on this experience, Tesla is confident that it can roll out the first car within two years of entering the Indian market and complete the entire factory within three years.

Tesla’s manufacturing model emphasizes the use of local content. In Tesla’s Berlin factory, the local content in its EVs is reportedly higher than that of German automaker Mercedes, and in Shanghai, the degree of localization is said to be as high as 95%.

The potential entry of Tesla into India represents a significant opportunity for the country. It aligns with India’s goals for local manufacturing, sustainability, integration into global supply chains, and strengthening ties with the United States. The impact of Tesla’s investment in India’s EV industry could be substantial, paving the way for a greener and more sustainable transportation future..

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